Imminent life-changing inheritance. What to do first?

WishIHadKnownBetter

Hello, I am a long-time lurker but have not posted before .I have been looking through various threads so have a very basic outline, but I am looking for some advice on where to go, who to speak to etc., along with what immediate steps I should take.

I will be receiving a life-changing inheritance very soon (£550k) on 3rd April and the thought is overwhelming!

Background:
I am married, both late 40s. Two teenagers. We have little savings, approx £6k in current accounts and an old ISA.  We have a low-ish income but no mortgage or debts so live comfortably if not extravagantly.

Questions:
My first concern is what to do with the lump sum when it arrives in our current account. Will I need to inform the bank it is coming? 

I assume myself and my husband can immediately transfer £20k each into an ISA each before 5th April or is that cutting it too fine?

We can then do the same after 6th April. If so, is it better to open new ISAs at that point or just transfer into the same ones?

I think that is all we can do to start. Do we then look at splitting into savings accounts to start earning some interest, but be sure we are under £85k in each bank?

Where do we go from
there? Do we seek advice from a Financial Advisor, and if so are all IFAs much of a muchness?

We pay into DB pensions but that is all. Should we seek separate pensions advice?

As I say, an overwhelming position to be in, but without a clear idea of what to do yet, we need a short-term plan whilst we decide on the next phase of our lives. 

We are happy in our house so not looking to move. We do want to use it to make our lives easier and give the kids a solid start as they become adults. We are quite risk adverse and are scared of frittering the money away on tax or unwittingly devaluing it by simply doing nothing. 

So yes. Once we max out an ISA, where do we go and who do we speak to?

eskbanker

The Flowchart - UKPersonalFinance Wiki offers a structure to help decide what to do with a lump sum, but yes, one of that size would probably point you towards paid advice:

https://www.moneysavingexpert.com/savings/best-financial-advisers/

Linton

In the short term you need to ensure the money is safe.  I suggest NS&I where the money is fully guaranteed by the Government.

Then the next step is to decide broadly what you want it for and when.  Only then is it sensible to make decisions about where to put it for the long term. The decision wont be cast in stone but some basis for future plans for the money is necessary. 

Possible things you could do...
1) Save it for future inheritances
2) Retire now
3) Increase your current standard of living by giving yourselves a steady income
4) expensive holidays every year
5) All of the above
etc etc

Only when you have a rough idea of what you want would it be sensible to consult an IFA as to how to achieve it.  Best to use a small local Independent Financial Advisor rather than one of the nationals who would likely be much more expensive.  Avoid anyone who is not independent (eg your bank advisor) who would not be able to say they are an IFA and would be restricted to only selling you their employer's  products.

A local high street IFA should be well used to dealing with lump sums of £500K.  A good way to find one is from family and friends or by Googling  for say 3 in your nearest town and then fixing up a free half hour meeting with each for you to explain what you want and they to explain what they can do for you and the cost. You can then chose the one you would feel most comfortable working with.

eskbanker

WishIHadKnownBetter said:

Do we then look at splitting into savings accounts to start earning some interest, but be sure we are under £85k in each bank?

Just to pick up on that comment, you can take your time over that, as up to £1m of inheritance money is protected by FSCS for the first six months:

https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/

Brie

eskbanker said:

WishIHadKnownBetter said:

Do we then look at splitting into savings accounts to start earning some interest, but be sure we are under £85k in each bank?

Just to pick up on that comment, you can take your time over that, as up to £1m of inheritance money is protected by FSCS for the first six months:

https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/

And adding on - the £85k is for each individual and in each banking group.  So if you and the OH had £85k each (total £170k) in Natwest then you don't want to put any into RBS and so on.

Take your time to pick an IFA.  I've chatted with a number and some you know immediately you won't like.  Others seem to want to get you to do what they want rather than what you want.  Don't be shy about asking any friends, family or work colleagues for recommendations.  

WishIHadKnownBetter

Ah thanks, that is reassuring to read. 

 We have had lots of suggestions, but I am also in a transition period with my job which may well add redundancy into the equation. Until that is decided we don’t want to make any life plans.

Is there a general need to inform the bank of the incoming money? I believe it will be via CHAPs from a solicitor but I am waiting for details.

MX5huggy

You don’t need to inform your bank. It will just arrive. 

Open the ISA’s now with £100 each or maybe put as much as you can into them now, then come the 3rd it’s just a simple bank transfer. To fill them to the £20k limit this tax year. 

WishIHadKnownBetter

Brie said:

eskbanker said:

WishIHadKnownBetter said:

Do we then look at splitting into savings accounts to start earning some interest, but be sure we are under £85k in each bank?

Take your time to pick an IFA.  I've chatted with a number and some you know immediately you won't like.  Others seem to want to get you to do what they want rather than what you want.  Don't be shy about asking any friends, family or work colleagues for recommendations.  

Thank you. We come from a modest background so do not really know anyone to ask, but there is an IFA on our high street as a starting point.

We have had a couple of suggestions about buying property but we don’t want to become landlords. So beyond that we are not really sure what we want. 

Ideally we would like to continue working but part-time, so a way to replace the income would be our thinking. And to bablw
to help our kids out if/when they go to university and a house deposit.

Other than that we have no plans!

WishIHadKnownBetter

Linton said:

Only when you have a rough idea of what you want would it be sensible to consult an IFA as to how to achieve it.  Best to use a small local Independent Financial Advisor rather than one of the nationals who would likely be much more expensive.  Avoid anyone who is not independent (eg your bank advisor) who would not be able to say they are an IFA and would be restricted to only selling you their employer's  products.

A local high street IFA should be well used to dealing with lump sums of £500K.  A good way to find one is from family and friends or by Googling  for say 3 in your nearest town and then fixing up a free half hour meeting with each for you to explain what you want and they to explain what they can do for you and the cost. You can then chose the one you would feel most comfortable working with.

Thank you. Yes, as above we need to decide what we want, but have some breathing space to do so.

As an aside, and having never been in this situation before, I assume we will be paying tax on the interest next year if we simply have in savings accounts for a while. We already complete self-assessments for our self-employment (they are simple returns). We can presumably account for this ourselves or does it require specialist accounting knowledge?

But there wouldn’t be any tax to pay as the lump sum hits our account if I understand correctly?

WishIHadKnownBetter

Thank you. I have lurked around the forum for months but haven’t ventured into the main site much - oops

eskbanker 

offers a structure to help decide what to do with a lump sum, but yes, one of that size would probably point you towards paid advice:

https://www.moneysavingexpert.com/savings/best-financial-advise

EthicsGradient

WishIHadKnownBetter said:

Linton said:

Only when you have a rough idea of what you want would it be sensible to consult an IFA as to how to achieve it.  Best to use a small local Independent Financial Advisor rather than one of the nationals who would likely be much more expensive.  Avoid anyone who is not independent (eg your bank advisor) who would not be able to say they are an IFA and would be restricted to only selling you their employer's  products.

A local high street IFA should be well used to dealing with lump sums of £500K.  A good way to find one is from family and friends or by Googling  for say 3 in your nearest town and then fixing up a free half hour meeting with each for you to explain what you want and they to explain what they can do for you and the cost. You can then chose the one you would feel most comfortable working with.

Thank you. Yes, as above we need to decide what we want, but have some breathing space to do so.

As an aside, and having never been in this situation before, I assume we will be paying tax on the interest next year if we simply have in savings accounts for a while. We already complete self-assessments for our self-employment (they are simple returns). We can presumably account for this ourselves or does it require specialist accounting knowledge?

But there wouldn’t be any tax to pay as the lump sum hits our account if I understand correctly?

No, it doesn't need any specialist knowledge - it's just adding up the interest from each account, and each bank etc. will give you their figure, either as a yearly summary or recorded on the account as it's added.

Correct, no tax to pay now. It'll all be payable for the 25-26 tax year (so you pay HMRC by Jan 2027), or, if you don't put it into interest-bearing accounts until April 6th or later, and they pay on their anniversary of opening, the interest could fall in the 26-27 tax year, and you wouldn't have to pay HMRC until Jan 2028. Worth recording that you have that bill to pay later, of course.